RTTNews - After a lackluster start to the session, stocks are continuing to show a lack of direction in early afternoon trading on Wednesday. The major averages are stuck on opposite sides of the unchanged line as traders react to a mixed report from the housing sector.
The report from the National Association of Realtors showed that existing home sales in the month of April increased by slightly more than economists had been expecting, although the report also showed a considerable increase in housing inventories.
Investors reacted mildly to the news, as equities are seeing little change following the release of the data. The stagnant reaction came as the day's session has been marred by low volume, with the major averages unable to sustain any significant moves.
Traders are also digesting comments from Treasury Secretary Timothy Geithner, who spoke in Boston this afternoon, remarking on the progress seen in the first 100 days following the passage of the landmark government stimulus package.
In recent trading, the Nasdaq has pulled back off a fresh high for the session, although it is currently holding onto a moderate gain. The Nasdaq is up 11.49 at 1,761.92 and the S&P 500 is up 0.73 at 911.06, while the Dow is down 21.02 at 8,452.47.
The major sectors continue to turn in a mixed performance, contributing to the relatively moves shown by the broader markets.
Airline stocks are continuing their slide, with the Amex Airline Index falling by 2.1 percent. Specifically, shares of Delta Air Lines (DAL) have weighed down the index, plummeting by 9.1 percent to set a 2-month intraday low.
Notable weakness has also emerged among commercial real estate stocks, with the Morgan Stanley Real Estate Index dropping by 1.8 percent on the day. With the retreat, the index is pulling back off of the 2-week high set in the previous session.
While railroad, chemical, and utilities stocks are also under pressure, semiconductor stocks continue to turn in some of the day's best performances. The Philadelphia Semiconductor Index is up 3.4 percent, rising to a nearly 3-week intraday high.
Steel stocks are also seeing considerable upside, with the Amex Steel Index climbing by 3.5 percent on the session, reaching a 7-month high.
Electronic storage stocks also continue to advance, with the Amex Disk Drive Index rising by 2.1 percent on the session. Oil service, housing and healthcare provider stocks are also posting strong gains.
Stocks in the News
Shares of Cree Inc. (CREE) are on the rise after the firm increased its fourth quarter earnings forecast to between $0.15 and $0.17 per share from prior expectations of $0.13 to $0.15 per share. Shares of the semiconductor devices manufacturer are up by 8 percent, adding to recent gains to reach a 13-month high.
Retailer Chico's Fas (CHS) is also climbing after the firm reported adjusted first quarter earnings of $0.11 per share, up from $0.07 per share in the previous year. The results beat Wall Street expectations. On the news, the stock is up by 8 percent on the day.
On the other hand, shares of Monsanto (MON) are down 5.1 percent after the company said that it now expects to deliver third-quarter earnings, both on an ongoing and as-reported basis, of approximately $1.15 per share. Analysts had expected the company to earn $1.58 per share.
In Focus: Housing Data, Corporate News, Earnings, Fed Buyback
The National Association of Realtors said that existing home sales rose 2.9 percent to an annual rate of 4.68 million units in April from a downwardly revised rate of 4.55 million units in March.
Economists had expected sales to rise to a 4.66 million unit rate from the 4.57 million unit rate originally reported for the previous month.
While the pace of existing home sales increased compared to the previous month, total housing inventories at the end of April represented a 10.2-month supply compared with a 9.6-month supply in March.
A separate report from the housing sector released earlier showed that mortgage application volume tumbled more than 14 percent last week, as refinance activity plunged nearly 19 percent.
The Mortgage Bankers Association revealed that its market index of mortgage application volume fell 14.2 percent on a seasonally adjusted basis for the week of May 22nd. The Market Composite Index was 786.0 compared to 915.9 in the previous week.
In corporate news, Bank of America (BAC) said that it raised almost $26 billion in its capital plan since the stress test results were announced and is well on its way to reaching the $33.9 billion indicated Supervisory Capital Assessment Program or SCAP buffer set by the Federal Reserve.
The company announced last week that it raised $13.5 billion through issuing 1.25 billion shares in an at-the-market common stock offering. It has also sold part of its holdings in China Construction Bank, generating a capital gain.
Traders are also keeping an eye on auto icon General Motors (GM), which is on the cusp of entering bankruptcy. This morning, GM indicated that its bondholders have rejected the embattled automaker's debt-for-stock offer.
On the earnings front, AutoZone (AZO) reported third quarter net income $3.13 per share, beating Wall Street expectations of $2.89 per share. While AutoZone benefited from an increase in replacement-part sales as consumers held onto their cars longer, the company's stock is seeing some weakness in afternoon trading, falling by 4.4 percent.
Separately, Staples (SPLS) reported adjusted first quarter earnings of $0.22 per share. The adjusted results edged out Wall Street analysts forecasts, which had called for the company to report earnings of $0.21 per share.
In other news, the Federal Reserve continued its treasury buyback program this morning, the second quantitative easing move of the week.
The New York arm of the Federal Reserve purchased $6.0 billion worth of securities with maturity dates ranging from May of 2012 to August of 2013. The day's buyback saw a total of $18.82 billion in treasuries submitted for the purchase.
This week, the Fed purchased $7.55 billion in treasuries bringing the total to $130.53 billion since the program began on March 25th.
In overseas trading, stock markets across the Asia-Pacific region finished notably higher on Wednesday. Japan's benchmark Nikkei 225 Index rose 1.4 percent, while Hong Kong's Hang Seng Index jumped by 5.3 percent.
The major European markets closed modestly higher, with the U.K.'s FTSE 100 Index finishing up by 0.1 percent, while the French CAC 40 Index and the German DAX closed up 0.8 percent and 0.3 percent, respectively.
In the bond markets, treasuries continue to show considerable weakness on the day. Subsequently, the yield on the benchmark ten-year note is up to 3.56 percent, a jump of 6.3 basis points on the day.
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